Summary
Full Decision
ARBITRAL DECISION
The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Fernando Miranda Ferreira and Diogo Feio, appointed by the Deontological Board of the Administrative Arbitration Center to form an Arbitral Tribunal:
I – REPORT
On the 30th of May 2016, A…, Lda, NIPC…, with registered office in …, …, …– … …- Seia, filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of articles 2nd and 10th of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking the declaration of illegality of the assessment act for the Municipal Tax on Onerous Transfer of Real Property (IMT), evidenced by document no.…, dated 31.03.2016, in the amount of €65,000.00.
To support her request, the Claimant alleges, in summary, that the acquisition subject to taxation benefits from an exemption pursuant to no. 3 of article 19 of CIMT, an exemption for automatic recognition, in accordance with the provisions of item d), no. 8 of article 10 of the IMT Code and no. 1 of article 5 of the Tax Benefits Statute (EBF).
On 01/06/2016, the request for constitution of the arbitral tribunal was accepted and automatically notified to AT.
The Claimant did not proceed with the appointment of an arbitrator, therefore, pursuant to the provisions of item a) of no. 2 of article 6 and item a) of no. 1 of article 11 of RJAT, the President of the Deontological Board of CAAD appointed the signatories as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable period.
On 20-07-2016, the parties were notified of these appointments and did not express the intention to refuse any of them.
In accordance with the provisions of item c) of no. 1 of article 11 of RJAT, the collective Arbitral Tribunal was constituted on 05-08-2016.
On 30-09-2016, the Respondent, duly notified for such purpose, submitted her response defending herself solely by way of objection.
Given that, in this case, none of the objectives legally assigned to it were present, pursuant to the provisions of articles 16 c) and 19 of RJAT, as well as the principles of procedural efficiency and prohibition of useless acts, the holding of the meeting referred to in article 18 of RJAT was dispensed with, as well as the submission of arguments by the parties.
A period of 30 days was set for the pronouncement of final decision, following the submission of arguments by AT, a period that was extended twice.
The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to articles 2, no. 1, item a), 5 and 6, no. 1, of RJAT.
The parties have legal standing and capacity, are legally entitled and are legally represented, pursuant to articles 4 and 10 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
The proceedings are not affected by nullities.
Thus, there is no obstacle to consideration of the merits of the case.
All considered, it is necessary to decide
A. FACTUAL MATTER
A.1. Facts Established as Proven
1- By notarial deed of purchase and sale executed on 31 March 2016, at the Notarial Office of …, the Claimant herein acquired an urban property, located at …, …, …, designated as "…" and registered in the property register under article …, which came from article … of the former parish of …, for the amount of €1,000,000.00.
2- The said property was acquired from the Insolvent Estate of company B…, LDA, declared insolvent by final judgment, on 25 September 2012, in the context of asset attachment proceedings no. …/12…T….
3- The said Certificate also certified that "Such transfer enjoys the benefits related to non-payment of the municipal tax on onerous transfer of real property (IMT), pursuant to the provisions of article 270 of CIRE (…)".
4- In order to execute the aforementioned notarial deed, the Claimant verbally requested from the Tax Office of …, the respective exemption pursuant to no. 3 of article 19 of CIMT (having for this purpose exhibited the Certificate of the Court of the District of Guarda previously mentioned).
5- The Tax and Customs Authority (AT) considered that the operation in question was not exempt, since it was not a transfer of the universality of the insolvent company and proceeded to assess IMT, relating to the taxable event at issue here, evidenced by document no.…, with date of assessment and declaration of 31.03.2016, in the amount of €65,000.00 (€1,000,000.00 x 6.5%).
6- The Claimant proceeded to pay the said amount of €65,000.00, as certified by payment certificate no. … (TF…), of 2016-03-31.
7- The Claimant herein filed the initial request for the present action on 30.05.2016.
A.2. Facts Established as Not Proven
With relevance to the decision, there are no facts that should be considered as not proven.
A.3. Reasoning of the Proven and Not Proven Factual Matter
With respect to the factual matter, the Tribunal is not required to pronounce on everything alleged by the parties; rather, it has the duty to select the facts relevant to the decision and to distinguish proven from not proven facts (cf. article 123, no. 2, of CPPT and article 607, no. 3 of CPC, applicable by virtue of article 29, no. 1, items a) and e), of RJAT).
Thus, the facts relevant to the judgment of the case are chosen and selected based on their legal relevance, which is established in light of the various plausible solutions to the question(s) of Law (cf. former article 511, no. 1, of CPC, corresponding to current article 596, applicable by virtue of article 29, no. 1, item e), of RJAT).
Thus, taking into account the positions assumed by the parties, in light of article 110/7 of CPPT, and the documentary evidence attached to the case file, the above-listed facts were considered proven, with relevance to the decision.
B. THE LAW
1- The disputed issue in the present arbitral action concerns the interpretation of the provisions of no. 2 of article 270 of CIRE, specifically with regard to whether all acquisitions of real property within the scope of insolvency and company recovery proceedings are exempt from IMT or only those that occur within the scope of acquisition of businesses or commercial establishments.
2- No. 2 of article 270 of CIRE, in its current wording, provides as follows:
"Also exempt from municipal tax on onerous transfer of real property are acts of sale, exchange or transfer of the business or of its establishments, integrated within the scope of insolvency plans, payment plans or recovery plans or carried out within the scope of liquidation of the insolvent estate".
3- The Claimant understands that this rule should be interpreted to the effect that IMT exemption is granted, both in the context of operations for the full or partial acquisition of the business subject to the insolvency proceedings, as well as to mere acts of acquisition of real property considered in isolation carried out in the phase of liquidation of its assets.
4- In the view of AT, the rule in question only provides for IMT exemption in cases where real property is acquired within the scope of a business or commercial establishment, in that the sale of the business's real property, in isolation, is not covered by the exemption and is subject to IMT under general terms.
Let us examine this.
5- The question has been persistently addressed in the courts, as evidenced by the Decision no. 01350/15 of the STA of 20/01/2016:
- Decision of 17 December 2014, rendered in case no. 1085/13;
- Decision of 11 November 2015, rendered in case no. 968/13;
- Decision of 18 November 2015, rendered in case no. 575/15;
- Decision of 18 November 2015, rendered in case no. 1076/15.
6- Such Decision merely refers to the reasoning and understanding set forth in the judgment of 16 December 2015, rendered in case no. 1345/15, of the same STA, which, in essence, states:
(…) The adoption of the interpretation of article 270, no. 2 of CIRE which has been consistently and repeatedly adopted by the STA, the understanding which has been adopted and which is hereby reaffirmed, insofar as it constitutes what best adapts the legal text to the meaning and extent of the legislative authorization under which the rule was enacted by the Government in a matter reserved to the Assembly of the Republic and because such interpretation is that which best serves the purpose of no. 2 of article 270 of CIRE - "to promote and support the rapid sale of property comprising the insolvent estate for obvious reasons of interest of the creditors, but also of the public interest in resuming the normal functioning of the business world in which each insolvency process presents itself as a disturbing element", by giving tax incentives to those who acquire real property comprising the insolvent estate and which will be sold in the liquidation phase – there being, in that light, no reason to distinguish between situations in which the business is being sold as a whole with all its assets and liabilities, and situations in which one or more of the commercial establishments that comprised it are being sold, or in which real property comprising its assets are being sold(….)
7- Arbitral jurisprudence has also decided in the same sense as the STA, as is evident from cases 764/2014-T of 29-05-2015, no. 99/2015-T of 27-10-2015, no. 95/2015-T 123/2015-T of 01-09-2015, 321/2016 of 01-11-2016 and 138/2016-T of 10-10-2016.
8- Now as is argued in this latter Decision:
(…) The CPEREF, the legislation that preceded CIRE, provided, in no. 2 of article 121, an exemption from transfer tax for "transfers of real property, integrated in any of the company recovery measures, which result (…) from the sale, exchange or transfer of elements of the company's assets (…)". There were, therefore, no doubts that the exemption applied to the isolated sale of real property occurring within the scope of company recovery proceedings.
Subsequently, Law no. 39/2003, of 22 August, authorized the Government to legislate on the insolvency of natural and legal persons, repealing the CPEREF. The new legal regime should place emphasis on the satisfaction of creditors, whether through the route of liquidation of assets or through an insolvency plan (cf. article 1, no. 2, of Law no. 39/2003). With respect to tax benefits, no. 3 of article 9 of Law no. 39/2003 authorized the Government "to exempt from municipal transfer tax the following transfers of real property, integrated in any insolvency plan or payment plan or carried out within the scope of liquidation of the insolvent estate: (…) those that result (…) from the sale, exchange or transfer of the business, establishments or elements of its assets (…)". Thus, Law no. 39/2003 was even more favorable to the transfer of real property included in the insolvent estate than the CPEREF in that it did not restrict the exemption from taxation to transfers of real property that could take place in a context of company recovery, extending it also to transfers that took place in a context of liquidation of the insolvent company or its establishments.
The same decision states that the Supreme Administrative Court (STA) has had the opportunity, on various occasions, to clarify what should be understood as the ratio legis of the legal provision under analysis, citing, by way of example, the Decision of 17.12.2014, appeal 01085/13, where it is mentioned that "account must be taken of the objective that the legislator intends to achieve with the grant of such exemption, - «to promote and support the rapid sale of property comprising the insolvent estate for obvious reasons of interest of the creditors, but also of the public interest in resuming the normal functioning of the business world in which each insolvency process presents itself as a disturbing element», by giving tax incentives to those who acquire real property comprising the insolvent estate and which will be sold in the liquidation phase. There being no need to differentiate, for this purpose, between situations in which the business is being sold as a whole with all its assets and liabilities, and situations in which one or more of the commercial establishments that comprised it are being sold, or in which real property comprising its assets are being sold. The objective which underlies the purpose of the rule will be equally pursued when the acquisition has as its object elements of the company's assets, it not being necessary that the object be the business or establishments thereof integrated within the scope of an insolvency plan."
Finally, the illustrious Arbitrators state that …it is also important to consider the systematic element to determine the meaning of the rule in question, in the first place because the IMT exemption provided for in no. 2 of article 270 of CIRE is not the only one provided for operations of onerous transfer of real property that take place within the scope of the insolvency process, being accompanied by the IMT exemption also provided for in no. 1 of article 270 of CIRE and by the stamp duty exemption provided for in items d) and e) of article 269 of CIRE. It happens that both one and the other apply, clearly, both to the transfer of real property carried out together with the business or establishment of which they form part, and to the isolated transfer of real property. Also from this perspective, it appears, therefore, that the interpretation according to which the IMT exemption provided for in no. 2 of article 270 of CIRE encompasses the transfer of real property when carried out together with the business or establishment of which they form part or when carried out in isolation is the most consistent with the overall spirit of the legal system.
In conclusion, they state, …before the doubts raised by the lack of clarity of the verbal wording of the provision in question, recourse to the historical, teleological and systematic elements allows us to conclude with certainty that the IMT exemption provided for by no. 2 of article 270 of CIRE applies, not only to sales or exchanges of businesses or establishments as a universality of goods, but also to sales and exchanges of real property (as elements of its assets), provided that they are framed within the scope of an insolvency plan or payment plan, or carried out within the scope of liquidation of the insolvent estate.
9- It is important to note, finally, that the binding nature of the information provided in Proceeding 2009…-IVE no. … invoked in AT's response applies only to that specific case and its implications and effects cannot be extended to other situations.
10- The Courts, as independent bodies, are not, naturally, subordinate to the decisions taken by the Administration; it is their responsibility to interpret and apply tax law without any dependence on the criteria adopted by the Administration. AT cannot derogate from the principle of tax legality; for that reason, it will always be possible to affirm the non-compliance of the tax act with existing legal rules and their interpretation.
11- In this manner, as mentioned above, the existing circumstances required the administrative decision in the contrary sense, and it is certain that this Arbitral Tribunal, even if aware of that binding preliminary information, is, naturally, not bound by the understanding and considerations contained therein.
12- Given the consolidated jurisprudence transcribed above, to which we fully adhere, as it is important to contribute to a uniform interpretation and application of Law (article 8, no. 3 of the Civil Code), it is necessary to conclude that the rule provided for in no. 2 of article 270 of CIRE encompasses operations of transfer of real property of the insolvent estate that take place in an isolated manner, that is, not integrated in the transfer of the business or a commercial establishment, as well as those that take place in the context of these more comprehensive transfers.
13- For that reason, the contested assessment is affected by an error regarding legal prerequisites, consisting of the violation of article 270, no. 2, requiring its annulment.
14- With respect to the claim for compensatory interest filed by the Claimant, article 43, no. 1, of LGT establishes that compensatory interest is due when it is determined that there was an error attributable to the services as a result of which payment of the tax debt was made in an amount superior to that legally due.
15- In the case, the error affecting the assessment is attributable to the Tax and Customs Authority, which carried out the assessment act on its own initiative.
The Claimant therefore has the right to be reimbursed the amount paid (pursuant to the provisions of articles 100 of LGT and 24, no. 1, of RJAT) and, moreover, to be compensated for the undue payment through the payment of compensatory interest by the Respondent, from the date of payment of the amount until reimbursement, at the legal default rate, pursuant to articles 43, nos. 1 and 4, and 35, no. 10, of LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.
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C. DECISION
Therefore, this Arbitral Tribunal decides to judge the arbitral claim filed as well-founded and, in consequence,
a- To declare the annulment of the IMT tax assessment act disputed in the amount of €65,000.00;
b- To determine the reimbursement of the tax unduly paid;
c- To condemn AT to the payment of compensatory interest due from the date of payment of the tax until full reimbursement of the amount paid;
d- To condemn the Respondent to pay the costs of the proceedings, fixed below.
D. Value of the Proceeding
The value of the proceeding is fixed at €65,000.00, pursuant to article 97-A, no. 1, a), of the Code of Procedure and Tax Proceedings, applicable by force of items a) and b) of no. 1 of article 29 of RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
E. Costs
The value of the arbitration fee is fixed at €2,448.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the claim was considered wholly well-founded, pursuant to articles 12, no. 2, and 22, no. 4, both of RJAT, and article 4, no. 4, of the said Regulation.
Notify the parties.
Lisbon, 6 January 2017
The Presiding Arbitrator
(José Pedro Carvalho)
The Arbitrator Member
(Fernando Miranda Ferreira - Reporter)
The Arbitrator Member
(Diogo Feio)
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